January 06, 2020

MONTH-IN-BRIEF: Internet Law & Cyber-Security

Juliet Moringiello, Sara Beth A.R. Kohut

Data Privacy

Gaming App Operator Rolls the Dice on Arbitration and Loses

By John Ottaviani

A recent case from the Ninth Circuit addresses the question of under what circumstances does the download or a mobile application by a smartphone user establish constructive notice of the app’s terms and conditions.  In Wilson v. Huuuge, Inc., No. 18-36017, 2019 U.S. App. LEXIS 37952 (9th Cir. Dec. 20, 2019) (link: https://cases.justia.com/federal/appellate-courts/ca9/18-36017/18-36017-2019-12-20.pdf?ts=1576865078 ), the Ninth Circuit affirmed the district court’s decision to deny Huuuge’s motion to compel arbitration based on terms of use that the user did not have to read or to which the user did not have to affirmatively agree.

The Ninth Circuit applied traditional contract principles (“a contract is formed when mutual assent exists”) and followed its precedent in the website context in Nguyen v. Barnes & Noble, Inc., 763 F.3d 1171 (9th Cir 2014), to find that mutual assent to the terms of use turns on whether the consumer had reasonable notice of the terms of use.  After presenting various screenshots of the app, the Court decided that the terms were so obscure that the user did not have actual notice or constructive notice of the terms.  In particular, there was no reference to the terms in the opening profile page of the app, to find the terms the user would have to click on an ambiguous button to see the app’s full profile page and scroll through multiple screens to find the paragraph referencing the terms, and even then there was no box for the user to click to assent to the terms or any other indication that the user would be bound by the terms.  Instead, there was just a request for the user to read the terms, with no hyperlink to the terms.  The Court concluded that “… the user would need Sherlock Holmes’s instincts to discover the terms.”

In requiring that a website or mobile app provide “reasonable notice” of the terms of use to the user, the 9th Circuit’s decision in Huuuge is consistent with decisions of the First Circuit in Cullinane v. Uber Technologies, Inc., and the Second Circuit in Meyer v. Uber Technologies, Inc.  The case also follows the recent trend of including screenshots in the opinion to demonstrate how the user engages with the website.

Juliet Moringiello

Commonwealth Professor of Business Law, Widener University Commonwealth Law School

Juliet Moringiello is the Commonwealth Professor of Business Law at Widener University Commonwealth Law School in Harrisburg, PA, where she teaches Property, Bankruptcy, Secured Transactions, Sales, and a seminar on Cities in Crisis. She earned her B.S.F.S. at Georgetown University, her J.D. at Fordham University School of Law, and her LL.M in Legal Education at Temple University School of Law. Professor Moringiello is Chair of the Pennsylvania Bar Association Business Law Section, a Uniform Law Commissioner for Pennsylvania, and a member of the American Law Institute. She is also a Fellow of the American College of Commercial Finance Lawyers and has held several leadership positions in the American Bar Association Business Law Section.

Sara Beth A.R. Kohut

Co-Chair; Cybersecurity, Privacy, and Data Protection Group; Young Conaway

Sara Beth’s practice focuses on advising legal representatives for future claimants in connection with asbestos mass tort insolvency matters and settlement trusts. She has also represented national and local businesses in cases involving intellectual property, corporate and commercial issues in the federal and state courts in Delaware. Sara Beth has advised clients on strategies for protecting intellectual property rights and complying with obligations governing the privacy and security of sensitive data. She currently co-chairs Young Conaway’s Cybersecurity, Privacy, and Data Protection group.